Dynamic Asset Management Ltd v. Choi Chau Chung By Choi Lam Hung, His Guardian Ad Litem

HCA 1566/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1566 of 2015

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REASONS FOR DECISION

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Introduction

1.By a summons dated 22 October 2015 but was not issued until 23 October 2015, the plaintiff applied for summary judgment under Order 14 of the Rules of the High Court, Cap 4A.

2.The summons came before me on 3 August 2016; I dismissed the summons with costs, summarily assessed by me at $133,000, to be paid by the plaintiff to the defendant forthwith.

3.I now hand down my reasons in writing.

4.The plaintiff, Dynamic Asset Management Limited (動力資產管理有限公司), is a money lender registered under the Money Lenders Ordinance, Cap 163.

5.On 10 July 2015, the plaintiff issued the writ in this action against “Choi Chau Chung (蔡湫松)” for recovery of the principal of a loan of $1,500,000 lent on 20 May 2015 and interest in the sum of $88,027.40 as at 9 July 2015 and further interest on $1,500,000 at 42% per annum with monthly rests.

6.The plaintiff and the defendant each prepared and placed before the court their own sets of hearing bundles.  This was improper and a waste of costs and brought about confusion and waste of time for the court.  These bundles omitted some relevant documents and I had to consult the court file to locate them.

7.By an Order dated 25 September 2015, Master Chow ordered “on the joint application of the Plaintiff and the Defendant” that:

“Choi Lam Hung, be added as the guardian ad litem of the Defendant and that the proceedings in this action be continued by the Defendant by Choi Lam Hung, his guardian ad litem.”

8.There was lack of care in the parties’ preparation of this consent order.  The first is whether the defendant had the mental capacity to make the joint application.  The second is the insertion in the wrong place of the Chinese name in the title of the action in the Order. 

9.For present purposes, the important point is that the plaintiff accepted that the defendant was a mentally incapacitated person as at 25 September 2015 which was just about four months from the date of loan on 20 May 2015.

10.On 29 September 2015, the defendant filed and served his Defence and Counterclaim.  This pleading was amended on 28 April 2016 pursuant to an Order of a Master dated 27 April 2016.

11.After the defendant had served his Defence and Counterclaim on 29 September 2015, the plaintiff issued on 23 October 2015 a summons under Order 14 for summary judgment for, among others, $1,698,493.15 with interest on the sum of $1,500,000 at the rate of 42% per annum from 12 September 2015 until payment.

12.The plaintiff created further chaos in this litigation by issuing on 19 April 2016 another summons under Order 14. This second Order 14 summons was dismissed with costs by a Master by an Order dated 18 May 2016.

13.The plaintiff relied on a document which reads as follows:

“HEART M.D. LTD

Dr. David C.K. Hu 胡中權醫生

MD, MRCS, FRCP, FACC

[Address, telephone and fax numbers]

Certificate Of Attendance 醫生證明書

20 May, 2015

To Whom It May Concern,

This is to certify that CHOI CHAU CHUNG attended the clinic today

76 year old man. No mental problem. Med: for glucose.

Bp 140/80 p. 70 He understands what he is doing and go for signing a mortgage.

Surgery for eyes and back.

Impression: He is here for medical certificate for mental competence.  He is aware of signing documents.  He is aware of signing documents and risks and goals involved.”

[Note: The repetition of “He is aware of signing documents” is written exactly as in the original.]

The relevant statutes

14.Order 14, rule 2 provides that:

“ (1) An application under rule 1 must be made by summons supported by an affidavit verifying the facts on which the claim, or the part of a claim, to which the application relates is based and stating that in the deponent’s belief there is no defence to that claim or part, as the case may be, or no defence except as to the amount of any damages claimed.”

15.Order 14, rule 7 provides that:

“ (1) If the plaintiff makes an application under rule 1 where the case is not within this Order or if it appears to the Court that the plaintiff knew that the defendant relied on a contention which would entitle him to unconditional leave to defend, then, without prejudice to Order 62 and in particular to rule 4(1) thereof, the Court may dismiss the application with costs and may require the costs to be paid by him forthwith.”

16.Section 18 of the Money Lenders Ordinance provides that:

“ (1) No agreement for the repayment of money lent by a money lender or for the payment of interest on money so lent, and no security given to any money lender in respect of any such agreement or loan, shall be enforceable unless–

(a) within 7 days after the making of the agreement, a note or memorandum in writing of the agreement is made in accordance with subsection (2) and signed personally by the borrower, and a copy of such note or memorandum is given to the borrower at the time of signing; and

(b) there is included in or attached to such copy a summary, in such form as may be prescribed, of such provisions of this Part and Part IV as may be prescribed,

and no such agreement or security shall be enforceable if it is proved that the note or memorandum was not signed by the borrower before the money was lent or the security was given.

(2) The note or memorandum shall contain all the terms of the agreement and in particular shall set out–

(a) the name and address of the money lender;

(b) the name and address of the borrower;

(c) the name and address of the surety, if any;

(d) the amount of the principal of the loan in words and figures;

(e) the date of the making of the agreement;

(f) the date of the making of the loan;

(g) the terms of repayment of the loan;

(h) the form of security for the loan, if any;

(i) the rate of interest charged on the loan expressed as a rate per cent per annum, or the rate per cent per annum represented by the interest charged as calculated in accordance with Schedule 2; and

(j) a declaration as to the place of negotiation and completion of the agreement for the loan.

(3)   Notwithstanding subsection (1), if the court before which the enforceability of any agreement or security comes in question is satisfied that in all the circumstances it would be inequitable that any such agreement or security which does not comply with this section should be held not to be enforceable, the court may order that such agreement or security is enforceable to such extent, and subject to such modifications or exceptions, as the court considers equitable.”

17.Section 24 of the Money Lenders Ordinance provides that:

“(1) Any person (whether a money lender or not) who lends or offers to lend money at an effective rate of interest which exceeds 60 per cent per annum commits an offence.

(2) No agreement for the repayment of any loan or for the payment of interest on any loan and no security given in respect of any such agreement or loan shall be enforceable in any case in which the effective rate of interest exceeds the rate specified in subsection (1).”

18.Section 27 of the Money Lenders Ordinance provides that:

“ (1) Any agreement entered into between a money lender and a borrower or intending borrower for the payment by the borrower or intending borrower to the money lender of any sum for or on account of costs, charges or expenses (other than stamp duties or similar duties) incidental to or relating to the negotiations for or the granting of the loan or proposed loan or the guaranteeing or securing of the repayment thereof shall be illegal.”

Money Lenders Ordinance

19.At the hearing before me on 3 August 2016 of the summons issued on 23 October 2015, Mr Micky T B Yip, counsel for the plaintiff, asked for judgment in the sum of $1,267,300.

20.Mr Lam Cheuk Fung, a manager of the plaintiff, deposed in §21 of his 2^nd Affirmation that:

“The Plaintiff and I verily believe that the Defendant has no defence to the Plaintiff’s claim.”

The Statement of Claim claims $1,500,000 as the principal of the loan.   Mr Lam Cheuk Fung was not forthcoming and there was no mention, whether in the Statement of Claim or in the 2^nd Affirmation of any fees and costs.  There was no pleaded claim for “restitution”.

21.The difference between $1,500,000 and $1,267,300 is $232,700.  By §7 of his 4^th affirmation, Lam Cheuk Fung deposed that the amount of $232,700:

“... consists of some fees and costs etc that may violate section(s) of the Money Lenders Ordinance.”

22.This is a very damaging concession. Nevertheless, the plaintiff felt able to continue pursuing its Order 14 application.

23.Charging fees and costs is illegal under section 27.

24.$232,700 is 18.36% of $1,267,300.  18.36% of a loan of $1,267,300 was charged as fees and costs for a loan repayable in one year. Charging 42% interest on $1,500,000 is equivalent to 49.71% interest on $1,267,300.  The effective rate of interest exceeds 60% per annum of a loan of $1,267,300.  Charging interest in excess of 60% is an offence under section 24 of the Money Lenders Ordinance.

25.Some particulars in the memorandum are now admitted to be incorrect.  Section 18 has not been complied with.

26.The plaintiff admits that it “may violate section(s) of the Money Lenders Ordinance”.  The question whether in all the circumstances it would be inequitable that the agreement should be held not to be enforceable is fact sensitive and should be decided at trial having regard to all the circumstances.  Such facts as are known at this interlocutory stage do not appear to be decidedly in favour of the plaintiff.

Defendant’s mental capacity

27.As stated in §9 above, the plaintiff accepted that the defendant was a mentally incapacitated person as at 25 September 2015.  Did the defendant have mental capacity four months earlier at the time of loan on 20 May 2015.  There is no evidence that the defendant suddenly lost mental capacity in these four months.  Mr Mickey T B Yip did not seem interested in dealing with my queries on what he relied on as “the doctor’s certificate”.

28.To start with, the document, quoted in full in §13 above was no more than “a certificate of attendance”, certifying that “CHOI CHAU CHUNG attended the clinic today”.  The person attending the clinic was not identified by any identifying document. The doctor did not claim to know Choi Chau Chung personally.

29.The document seemed no more than a record of what the person attending the clinic told the doctor.  It did not say the doctor conducted any test or examination on the mental capacity of the person attending.  It merely stated the doctor’s “impression”, not the doctor’s medical findings.  Mr Mickey T B Yip said the doctor was not a psychiatrist.

30.I wonder why any person with full mental capacity would volunteer the document as proof of mental capacity.  The document raises more questions than answers.  In my judgment, the document is not of assistance at this interlocutory stage.

31.Having regard to the very detailed report of Dr Wong Chung Kwong produced by the defendant, I consider that the question whether there was lack of mental capacity on the defendant’s part and the question whether any lack of mental capacity on the defendant’s part was apparent to the plaintiff’s officer(s) is a matter for trial.  I do not accept the allegation of the plaintiff’s officer as to the appearance and behaviour of the defendant on its face value.  Such allegation should be tested by cross‑examination at trial.

Conclusion

32.This is not a case for disposal under Order 14.  The plaintiff makes an Order 14 application knowing that the defendant relied on contentions which would entitle him to unconditional leave to defend.  I dismissed the application with costs requiring the costs to be paid by the plaintiff forthwith in accordance with Order 14, rule 7.

Mr Micky T B Yip and Mr Holden Slutsky, instructed by H Y Leung & Co, for the plaintiff

Mr Simon H W Lam, instructed by Henry Lam & Associates, for the defendant